A Central Corridor rail bid-opportunity mixer is scheduled for 2-4 p.m. Nov. 9 at the Minnesota Transportation Museum in St. Paul’s historic Jackson Street Roundhouse, 193 Pennsylvania Ave. E.
“It’s a chance to meet and find out if a business relationship would be worth pursuing,” says Laura Baenen, communications manager for the Central Corridor project.
The goal is to give construction subcontractors a preview of the primary construction contracts for the $941 million Central Corridor project that will go out for bids after expected federal funding comes through next year.
In particular, attendees will be able to meet with owners of Disadvantaged Business Enterprises (DBEs) to discuss potential partnerships. DBEs are specially certified minority- and women-owned businesses.
The Central Corridor project organizers’ goal is that 17 percent of the businesses working constructing on the Central Corridor project should come from the DBE community, according to Baenen.
“Getting to work on a public works project like this is a great experience for DBEs,” Baenen says. “It helps them, then, when they go on to bid on other projects. It looks good on their resume.”
Baenen stresses that the event is not simply a party or a networking session. “It will be a bid-opportunity information exchange. Several of the engineers on the project will be talking about the work that people would be bidding on.”
To register, contact Jackie Becker of the Metropolitan Council by e-mail at [email protected], or by phone at 651-602-1940, by Nov. 1.
This was an appeal from a judgment following a court trial limited to a determination of damages arising out of a highway construction project in which the District Court found that respondent-general-contractor breached its subcontract agreement with appellant-subcontractor. Appellant argued that the District Court erred by applying an equitable analysis to determine that appellant was entitled to no damages, rather than awarding damages under the contract. The Court of Appeals reversed the District Court’s order for no damages based on equity, and remanded for a determination of damages under the contract. Affirmed in part, reversed in part, and remanded.
The questions presented in this case concerned the interpretation and application of the 2-year statute of limitations in Minn. Stat. § 541.051, subd. 1(a) (2014), which applies to actions “arising out of the defective and unsafe condition of an improvement to real property.” Appellant used respondent as the general contractor for the construction of a building. The building had problems with water intrusion. Appellant brought an action claiming that respondent’s actions as general contractor were negligent. The District Court dismissed the action as untimely under Minn. Stat. § 541.051, subd. 1(a). The Court of Appeals affirmed. The Supreme Court held that (1) under the plain language of Minn. Stat. § 541.051, subd. 1, the statute of limitations for claims of defective construction can begin to run before substantial completion of the construction; and (2) the building owner’s assertion that a leak had been remedied, when taken in the context of an ongoing construction project and the absence of record evidence of ongoing water problems, created a genuine issue of material fact as to when the injury was discovered under Minn. Stat. § 541.051, subd. 1. Affirmed in part, reversed in part, and remanded.
A14-0724 328 Barry Ave., LLC v. Nolan Props. Group, LLC (Court of Appeals)
Rep. Alice Hausman, DFL-St. Paul, this afternoon described Gov. Tim Pawlenty’s letter critiquing the bonding bill now in conference committee as containing
Research at the University of Minnesota-Duluth may change the way timber bridges are maintained in Minnesota.
The Natural Resources Research Institute (NRRI) at UMD developed and field tested new techniques for detecting decay in bridges with timber pilings, arches, trusses or other structures. These techniques, which were announced in January, may extend the life of these bridges and allow inspectors and engineers to more precisely calculate — and extend — their remaining load-bearing capacity and useful life.
In 2010, a timber bridge over Elk Creek in Nobles County partially collapsed, but no injuries or deaths resulted. The bridge was supposed to be near the halfway point of its useful life.
According to MnDOT, there are 1,992 bridges with timber elements in Minnesota.
“A lot of [timber] bridges built in the ’50s are still in good condition,” says Don Fosnacht, director of the Center for Applied Research and Technology Development (CARTD), which is part of the NRRI. “We felt that with proper inspection they can be managed to have as long a life as steel or cement bridges.”
Traditionally, timber bridge inspection has consisted of three elements. A visual inspection is followed by hammer sounding (tapping on the wood with a hammer to listen for sounds that suggest decay) and coring (drilling into the wood to confirm it). These techniques were effective, but their results can be subjective. “With hammer sounding, three different people can have three different opinions on what the sound means,” says Bob Vatalaro, principal research shop foreman for NRRI’s Wood Materials and Manufacturing Program.
That subjectivity has often caused inspectors to err on the side of caution when deciding whether when a bridge should be replaced or its load bearing capacity lowered.“Inspectors and engineers don’t want to underestimate the extent of damage, so they tend to make conservative assumptions when assessing these bridges [with traditional methods],” says Todd Niemann, a bridge inspection engineer with the Minnesota Department of Transportation (MnDOT).
The new techniques require making openings in the wood, openings that will allow in moisture if they’re not properly sealed. They will only be employed after visual inspection and hammer sounding.
“These techniques supplement a traditional inspection,” Niemann says. “When you see visual signs of decay, these tools allow you to make an educated assessment of the damage condition.”
The techniques include moisture metering, stress wave timing, and resistance micro-drilling.
In moisture metering, the inspector drives two metal pins into the wood. The meter then passes a small amount of electrical current between the pins. The current passes through the wood faster when moisture is present.
“Bugs like to eat wood when it’s above 28 percent moisture content,” says Fosnacht. “It allows them to chew like they had dentures on.” By contrast, he says, wood with less than 20 percent moisture content is safer from insect attack.
Stress wave timing uses a microsecond timer and two probes. The timer measures how long it takes a sound wave, generated by a hammer tap on one of the probes, to travel to the other. Decay slows down the wave, so longer intervals indicate decay.
Resistance micro-drilling uses a 2- to 3-millimeter drill bit to create a hole for determining the extent of that decay. Lower resistance to the drilling shows a decrease in strength in the wood.
The techniques are good news for MnDOT, county, and city officials, Fosnacht says. “Now you can better maintain the bridge because you can put preservatives in areas where you find problems,” he says.
Niemann notes that inspectors can also demonstrate that a bridge still has 80 percent of its useful life left, instead of conservatively estimating 40 to 50 percent.
Sen. Scott Dibble, DFL-Minneapolis, said a transportation plan is a priority for Majority Leader Tom Bakk and the Senate caucus, but conceded that “the world wouldn’t come to an end” if no agreement was made. (File photo)
A comprehensive transportation package could prove the linchpin of the 2015 session, or the root of its ruination. So goes the thinking from some observers as House Republicans and Senate Democrats move forward, and in opposite directions, with separate plans to take care of the state’s various methods of travel.
The Senate plan cleared another committee on Thursday, leaving just one more vote in the taxes committee before that bill would be before the whole body. The House package was approved in the lower chamber on Tuesday, and now awaits a conference committee.
Even as the Senate bill was passing, one member of the minority questioned its chances of making it into law. Sen. John Pederson, R-St. Cloud, asked bill author Sen. Scott Dibble, DFL-Minneapolis, about comments from Senate Majority Leader Tom Bakk, who earlier that week had told the Pioneer Press that the Legislature is constitutionally required to pass a budget, but not a transportation bill.
Dibble said a transportation plan is still a priority for Bakk and the Senate caucus, but conceded that “the world wouldn’t come to an end” if no agreement was made.
“[Bakk] really wants to get it done,” Dibble said, “but, balanced against what other people want, we’ve got to see what we can get done.”
Pederson said the failure to pass a new transportation bill would be seen as a “victory” by some in the House, where the Republican majority has remained steadfastly opposed to any new gas taxes.
The House acted favorably on the revenue-neutral bill authored by Rep. Tim Kelly, R-Red Wing, which combines existing sales taxes related to automobile purchases, rentals and leases to create a new “stability fund,” at an estimated $3 billion over the next decade. Another $4 billion would come from “realignment” of MnDOT spending, as well as highway and general obligation bonds.
Kelly, offering a final defense of his bill on the House floor, explained that Republic
ans had considered funding plans as small as $2.5 billion and as large as $10 billion and, at $7 billion over the next 10 years, had come out close to the figure sought by Gov. Mark Dayton.
The Senate bill, meanwhile, would generate more than $1.2 billion in new revenue in the next budget through a new wholesale gas tax, which accounts for $800 million for road and bridge work, plus a sales tax increase on the seven-county metropolitan area for $423 million in new transit expenses.
Dibble acknowledged the distance between the two bills on Thursday, but allowed his to be changed only slightly during the committee hearing. One amendment, from Pederson, would have allowed trucks to purchase permits to travel above current weight limits, while letting local units of government vote to opt out of the expansion. Dibble said he is “generally in favor” of the idea, but said engineers and experts are still divided on the impact such large trucks have on roads and bridges, adding that the debate had become “very political.”
Pederson determined he did not have the votes to pass his amendment, and withdrew it.
The committee also acted to strike a measure initially proposed by Sen. Torrey Westrom, R-Elbow Lake, to eliminate the sales tax on construction equipment for the state’s highways. That provision was included in Dibble’s bill, but would not have gone into effect until July 1, 2019, or the first day of the 2020 fiscal year. Committee chair Sen. Richard Cohen, DFL-St. Paul, said he thought it “fiscally bad practice” to pass a budget plan beyond the 2018-19 “tails” biennium.
Westrom defended the measure, saying the state’s capturing the sales tax on construction costs for Minnesota Department of Transportation (MnDOT) projects only serves to divert dedicated transportation revenues to the general fund.
“You can even make an argument that it violates the constitutional dedication,” Westrom said.
Dibble, for his part, said he wished the idea would have fit into the current biennium, but its estimated cost — $23 million in reduced tax revenues per year — was beyond his target. He eventually sided with those seeking to cut the measure, and Westrom’s tax cut was amended out of the bill.
During the House floor debate, several Democrats, including Rep. Frank Hornstein, DFL-Minneapolis, the Democratic lead on the committee, urged Kelly to consider new options through the conference committee, and return to the House with a bill they could support.
Only one was ready to do so that night: Rep. Ron Erhardt, DFL-Edina, the swing-district moderate, was the lone DFL vote for Kelly’s bill, which passed on a 73-59 vote. Erhardt’s streak of independence on the issue dates back to 2008, when he led the so-called “override six” Republicans who joined Democrats to pass a transportation budget despite Gov. Tim Pawlenty’s veto.
Dibble, on Thursday, said he was also seeking Republican votes to bolster his plan, explaining that it was part of his reasoning for carrying Westrom’s provision, though he observed that no Republican had backed the proposal in the Senate Transportation Committee.
Speaking after the Senate hearing, Darrin Broton, a spokesman for the MoveMN coalition, said the bill’s successful path forward is only possible if it is linked with the Legislature’s handling of the tax bill, where House Republicans have introduced a $2 billion tax-cut.
“Transportation is one of two or three significant pieces for a global deal to get done — if a deal gets done,” he said.
Broton said the two legislative chambers and the governor’s office had a handful of matters in common: All three are open to the use of some of the state surplus for transportation projects, want to redress the lack of road funding for cities with populations under 5,000 and would dedicate a sales tax on leased vehicles to county roads and transit in Greater Minnesota.
Those few items could be shuffled together and passed as part of a “lights-on” transportation bill, Broton said, addressing another prospect Pederson referenced in his questioning of Dibble on Thursday. Defaulting to a pared-down bill would be a repeat of 2013, when DFL majorities failed to move a gas tax increase, and Broton warned that another delay would push new transportation revenues off for “at least” another two years.
“Advocates would be severely disappointed if we’re going to once again kick the can down the road and give transportation the budget leftovers at the end of the session,” Broton said.
The Mille Lacs Band of Ojibwe in Minnesota has received $8.9 million in federal stimulus act bond authority for construction of an education facility.
The bond authority was part of $1 billion that went to 58 American Indian tribes across the country in tribal development bonds.
The American Recovery and Reinvestment Act authorized the U.S. Treasury Department to award $2 billion in tribal bond authority to Indian tribal governments in two award rounds of $1 billion each.
The first application deadline was Aug. 15; the second deadline is Jan. 2, 2010.
The bonds may be issued by tribes either as traditional tax-exempt bonds or as Build America Bonds, which are taxable municipal bonds created by the stimulus act and which carry special tax credits and federal subsidies.
In the winter of our discontent, Minnesota as a whole eked out a net gain of 600 jobs in January while the construction industry lost jobs, according to a report released Thursday by the state Department of Employment and Economic Development.
January marked the sixth consecutive month of job gains. For the workforce as a whole, the state added 52,160 jobs over the past year, an increase of 1.9 percent. Revisions to the December total also put Minnesota above 2.8 million jobs for the first time in state history, DEED reported.
The state’s overall unemployment rate was 4.7 percent in January compared with 5.3 percent a year earlier. The state reported the same unemployment rate in December, still lower than the national unemployment rate of 6.6 percent.
The construction industry, which traditionally slows in winter, lost 900 jobs. But the sector continues to post the biggest year-over-year jobs growth rate of any employment sector in the state. It has added 9,562 jobs since January 2013 for an 11.9 percent gain. That’s 3 ½ times the national rate of 3.4 percent for construction job growth.
“I think some people are trying to get ahead of interest rates. They figure interest rates are going up,” said Chad Kompelien, president of the Builders Association of Minnesota and chief financial officer for Willmar-based Mike Kompelien Custom Homes Inc.
Steve Hine, research director of DEED’s Labor Market Information Office, said the agency’s data do not indicate what specific construction projects played a role in driving this growth. But he said it’s reasonable to conclude that developments like the new Vikings stadium have helped.
“I certainly would observe, as you would, that a lot of these large construction projects are contributing to the growth that we’ve seen,” Hine said.
Even so, Kompelien said, this winter’s frigid temperatures “cut down production seriously.”
“Considering our weather,” Hine said during a press conference, “I would expect to see some of this volatility from month to month even out.”
The industry also faces a shortage of skilled workers like carpenters, electricians and plumbers, Kompelien said. Many of those workers left the industry during the recession and few new workers enrolled in training programs at that time because they saw it as a dead end. The result is more workers leaving than coming in.
“I kind of think we had a lost decade of skilled trades, and that’s going to take some time to recoup,” he said.
Construction jobs in the state peaked at 146,052 in August 2005. The industry count is down 56,000 jobs from that peak as of January.
The January jobs numbers were released in March instead of February because of an annual revision of the employment data by the federal Bureau of Labor Statistics.
The state’s trade, transportation and utilities sector was the hardest hit in January, losing 3,200 jobs. Still, the jobs are up 2 percent over January 2013.
Meanwhile, professional, scientific and technical services, a subsector of professional business services that includes architects and engineers, added 500 jobs, in January, Hine said. That’s a 1.4 percent improvement over January 2013.
In all, Minnesota has regained 190,400 jobs since the low point of the recession in September 2009, according to seasonally adjusted figures.
Mankato, with a 2.6 percent increase in jobs since January 2013, had the fastest growth among the state’s five metropolitan statistical areas. The Twin Cities was third at 1.5 percent. Rochester, which lost 354 jobs, was the only area to have fewer jobs than the year before.
“Even with January’s extremely cold weather, hardworking Minnesotans continued to generate jobs,” said DEED Commissioner Katie Clark Sieben in a prepared release. “We’re particularly encouraged by the breadth of the labor market recovery, with all 11 of the state’s industrial sectors gaining jobs in the past year.”
THE JOBS PICTURE
Minnesota year-over-year employment growth by industry sector as of Jan. 31, 2014
Total non-farm employment: +52,160, +1.9%
Logging and mining: +53, +0.8%
Construction: +9,562, +11.9%
Manufacturing: +4,809, +1.6%
Trade, trans. and utilities: +10,245, +2.0%
Information: +1,434, +2.7%
Financial activities: +201, +0.1%
Prof. and bus. services: +6,337, +1.9%
Education and health services: +11,448, +2.4%
Leisure and hospitality: +3,597, +1.5%
Other services: +2,874, +2.5%
Government: +1,600, +0.4%
Source: Minnesota Department of Employment and Economic Development
Large borrowing bills for public construction projects are usually reserved for even-numbered years. So even the most hopeful advocates of such investments don’t expect anything like last spring’s $846 million bonding bill — supplemented by $200 million in cash — to emerge from the 2015 Legislature.
But that doesn’t mean they will go away empty-handed. The new chair of the House Capital Investment Committee said Tuesday that the “odds are in favor” of a bonding bill emerging from his committee in 2015.
“If you are a betting man, I would suggest you bet on some kind of bonding bill happening this year,” said Rep. Paul Torkelson, R-Hanska, who wields the committee’s gavel this year in the Republican-dominated House.
Odd-year bonding bills tend to be in the $200 million range. Recent odd-year bills were as large as $500 million in 2011, and as low as $156 million in 2013.
The 2011 package was unusual, because it was part of a compromise to end the budget impasse that shut down state government operations that year.
In 2009, the Legislature passed a $300 million bonding bill, but then-Gov. Tim Pawlenty eliminated $85 million worth of projects with line-item vetoes.
The Minnesota Management and Budget Office says the assumption for future capital budgets is $800 million in general obligation bonds in even-numbered sessions and $220 million in odd-numbered years.
State agencies and local governments are asked to submit their bonding requests to the MMB office the summer before a large bonding bill is expected to be taken up in the Legislature.
There’s “no formal process” for submitting requests to MMB in advance of an odd-numbered session, MMB spokesman John Pollard said.
In advance of the 2014 session, the MMB received $2.8 billion worth of requests, including $2.1 billion from state agencies and $682 million from local governments.
Some large institutions have already put out wish lists for 2015, even though it’s not a major bonding year.
The University of Minnesota is requesting $77 million in 2015, including $55 million for asset preservation, $18 million to replace two obsolete veterinary laboratories and $4 million to build a greenhouse for the U of M’s rare plant collection.
The asset preservation request would include replacement of windows, stairs, HVAC and electrical systems in the 67-year-old Mechanical Engineering building at 111 Church St. SE. in Minneapolis.
The Minnesota State Colleges and Universities system is requesting $145.9 million in general obligation bonding for a variety of projects, including asset preservation and projects not funded in 2014.
MnSCU’s total program cost is $182.6 million, including $36.7 million in system financing. MnSCU projects received $159.8 million from the 2014 bonding bill, but $126.4 million of its 2014 priorities were unfunded, according to MnSCU.
State Rep. Alice Hausman, DFL-St. Paul, said she would like to see a bill that would take care of some leftover projects that didn’t get funded last year and to make some language changes.
Hausman, the DFL lead on the House Capital Investment Committee, said it’s unfortunate that there weren’t more aggressive bonding bills in some of those recent years, because construction costs are now going up.
She also suggested more consistency in the size of the bonding bills.
Back-to-back bonding bills in the $500 million range have some merit because they “don’t feel quite as intimidating as that $1 billion,” said Hausman, a former chair of the committee. “Think of $498 million one year and $498 million the next year.”
Uncertainty surrounding the 2016 legislative session is a wild card in this year’s bonding debate. With the Capitol under renovation, there has been talk of skipping the 2016 session.
“If they actually are serious about this idea of only one year, that we are going to do everything this year, then of course there has to be” a bonding bill in 2015, Hausman said.
Torkelson thinks there will be a legislative session in 2016. He’s not keen about rushing into a large bonding bill in 2015 because he says there needs to be time for projects to be evaluated properly.
Though other hot topics like transportation funding have taken center stage so far this session, construction industry leaders hope that bonding will share at least some of the spotlight.
“We think bonding has a place and that it should be something that is on the table,” said Dave Semerad, CEO of the Associated General Contractors of Minnesota. “We don’t see any reason why we should wait just because it’s an off year.”
Matt Swenson, Gov. Mark Dayton’s press secretary, said the governor supports a bonding bill this session.
Minnesota’s roads are deteriorating, congestion is getting worse, safety is an increasing concern, funds are lacking and crumbling infrastructure is hitting state residents in the pocketbook, according to a new report.
The report, released Thursday by The Road Information Program (TRIP), a Washington, D.C.-based transportation research group, found that “many sorely needed transportation projects” in the state are still waiting for funding, despite the state and federal money that has stimulated transportation work in recent months.
Minnesota is getting $502 million for highways and bridges from the federal stimulus, with another $94 million for transit, but those dollars fall far short of the state’s needs, the report noted.
The report cited grim numbers from the Minnesota Department of Transportation: Minnesota has about $15 billion to spend on transportation priorities over the next 20 years, which is roughly $50 billion less than what the state will need over that period.
Among the report’s specific findings:
• 76 percent of the state’s “major urban roadways” are congested during peak travel times, the highest share in the nation.
• 32 percent of the state’s major roads are in “poor or mediocre” condition.
• 9 percent of the state’s bridges, 20 feet or longer, are structurally deficient and 3 percent are functionally obsolete.
• Minnesota’s rural traffic fatality rate is 1.27 deaths per 100 million miles of travel, nearly 2.5 times the fatality rate of all roads in the state.
• Inadequate capacity or poor pavement is costing Minnesota’s drivers $3.1 billion per year.
“I think the thing that comes out quite strongly is that there is clearly a cost to improving the transportation system, and there is a cost to not improving the transportation system,” Frank Moretti, TRIP’s director of policy and research, said in a phone interview.
“The 20-year plan put out by the state indicates that there is a significant shortfall of funding for projects that are needed to maintain mobility, and most of those are in the Twin Cities area. … People say, ‘How much should we invest in the transportation system?’ [But you also need to] look at the costs when you don’t do that.”
“An important and unappreciated nugget of the report is its quantifying of the costs that we all pay in time of delay and rough roads,” which is $3.1 billion each year, noted Tim Worke, director of the Associated General Contractors of Minnesota’s Highway Division.
“TRIP has to a great degree quantified the total transportation finance spectrum — state and federal. It is very important to Minnesota that the feds reauthorize [the federal surface transportation act] ASAP because of the role federal funds play in helping Minnesota pay for much needed projects,” continued Worke.
“This is an organization that does really good work,” said Margaret Donahoe, executive director of the Minnesota Transportation Alliance. “They did a really good job of putting together information that we have known about in Minnesota … making the case that the federal piece of our transportation funding is really, really critical.”
Complicating matters is the fact that the existing six-year federal transportation funding act expires at the end of this month; an 18-month extension is being discussed in Congress. Failure to pass a new six-year act would be a “missed opportunity” for putting people back to work in Minnesota, Donahoe said.
Findings in the TRIP report were unveiled during a Thursday morning press conference in Brooklyn Park.
TRIP describes itself as a “nonprofit organization that promotes transportation policies that relieve traffic congestion, improve road and bridge conditions, improve air quality, make highway travel safer and enhance economic productivity.”
A copy of the 39-page report, “Future Mobility in Minnesota: Meeting the State’s Need for Safe and Efficient Mobility,” is posted on the organization’s website, www.tripnet.org.
Crews worked Tuesday on a sound barrier along I-94 at Franklin Avenue in Minneapolis. A Minnesota Management & Budget report said MnDOT spent $2.3 million to prepare and recover from the state government shutdown last July. The report didn’t include claims by contractors, which are expected to run into the tens of millions of dollars. (Staff photo: Bill Klotz)
Additional sums could be in tens of millions
The Minnesota Department of Transportation spent about $2.3 million to prepare for and recover from a state government shutdown that stalled roughly 100 road construction projects last July.
The costs were included in a report released Tuesday by the Minnesota Management & Budget office, which says the state spent about $10 million overall in preparation and recovery costs.
In addition to the $10 million, the state lost about $49.7 million in “unrecoverable revenues” as a result of the shutdown, but saved approximately $65 million in payroll costs.
But the numbers — at least in MnDOT’s case — are only scratching the road surface.
The MnDOT costs detailed in the report don’t include the contractor claims stemming from the disruption of highway projects. Contractors have pending claims for everything from temporary traffic control to demobilizing and remobilizing their projects.
Those numbers aren’t in yet, but industry sources say the claims could be in the tens of millions of dollars.
“This will have a very real impact on the highway construction budget – taking money away from future projects for costs that should not have been incurred,” said Margaret Donahoe, executive director of the Minnesota Transportation Alliance.
“The impact to the trunk highway fund needs to be part of the estimate for the cost of the shutdown, and people need to realize that some construction projects will now be carried into next year’s construction season, costing more money and causing more delay.”
The report released Tuesday says the shutdown’s long-term economic impact is expected to be “minimal,” because state tax collections continued to be processed, which resulted when state lawmakers couldn’t agree on a budget for the fiscal year 2012-13 biennium.
“A temporary increase in state unemployment, accompanied by the temporary reduction in private-sector employment related to highway construction and state building projects, are expected to have only a marginal impact,” the report stated.
But the report also said the shutdown resulted in “widespread frustration among the public,” and affected the private sector “in numerous ways, such as the halting of highway construction projects, closing of state parks, delays in professional licensing and delays in permitting.”
The Associated General Contractors of Minnesota has a much harsher read on the shutdown’s impact.
Two-thirds of the 283 construction companies that responded to AGC-Minnesota’s 2011-12 industry assessment this fall said their businesses were “somewhat” or “significantly” affected by the shutdown.
At a Tuesday press conference, Minnesota Management and Budget Commissioner Jim Schowalter acknowledged that there are “likely to be lingering impacts,” including contractor claims.
AGC-Minnesota issued a statement saying that by not taking into account the claims and lawsuits that may result from highway contract suspensions, the report “deludes the public and policymakers into believing the shutdown was a wash for taxpayers and therefore acceptable.”
“Minnesota contractors will not be made whole for most of their shutdown-related losses,” AGC-Minnesota said in the statement. “Many will receive only a small percentage of their actual incurred costs. Contractors will be left having to shoulder losses imposed by a gridlocked political system.”
Based on more than 28,900 staff hours spent on shutdown-related tasks, MnDOT spent about $1.3 million in preparing for the lights-out period. The transportation department spent another $1 million — 20,000 staff hours — in recovery tasks.
MnDOT’s $2.3 million in preparation and recovery costs may not sound like a lot, but based on a quick review of projects from MnDOT’s 2011 metro area construction program, the money could have gone to more productive uses.
In other words, it’s slightly more than what it costs to install noise walls along Highway 169 in New Hope ($1.4 million), repair a Highway 77 bridge deck in Bloomington ($640,000) and perform Highway 212 landscaping in Eden Prairie ($189,000).
But the claims still loom as a much bigger expense. As of early September, as previously reported by Capitol Report’s sister newspaper Finance & Commerce, MnDOT saw the potential for 110 shutdown claims.
Sen. Joe Gimse, R-Willmar, chair of the Senate transportation committee, told Finance & Commerce last month that it will probably be spring or summer before the state “gets a handle” on all the transportation-related cost impacts of the shutdown.
“It’s going to be protracted is what I am hearing,” he said in October.
Among all state agencies, more than 200,000 staff hours were “redirected” from regular work to prepare for and recover from a shutdown that sent 19,000 state employees home with layoff slips.
The state paid more than $10.4 million in unemployment compensation, and sent about 1 million “pieces of correspondence” costing $552,000 in preparation for the shutdown, according to the report.
A “special master,” who was appointed by the court to review petitions for temporary funding, pocketed $59,295.
Justin Cummins: “Contractors that are thinking about…doing a dance to evade their contractual obligations do so at their peril” (Submitted photo)Phil Raines: there are legitimate reasons for a company to be double-breasted. (Submitted photo)
Minnesota construction trade unions are turning up the heat on union-signatory contractors who set up a separate non-union company, or “alter ego,” with the intent — in the unions’ view — of sidestepping their collectively bargained obligations.
Unions say the practice, known as “double-breasting,” is an attempt by union-signatory contractors to avoid paying union wages and benefits, though others say it’s a legitimate effort to become more competitive in union and non-union marketplaces.
What’s not disputed is that the practice has inspired a number of union-driven complaints in Minnesota, including a recent case that resulted in a $1.3 million settlement against Corcoran-based Hicks Concrete and Construction Science.
Justin Cummins, a Minneapolis attorney who represented construction trade unions in that case, said the Hicks/Construction Science settlement is a “cautionary tale” for contractors.
“Contractors that are thinking about playing games with their corporate form and doing a dance to evade their contractual obligations do so at their peril,” said Cummins, a shareholder with Minneapolis-based Cummins & Cummins.
Jim Susag, an attorney for Hicks and Construction Science, denied wrongdoing on the part of his clients, and said they agreed to the settlement as a business and financial decision.
“We deny the allegations of double-breasting and alter ego,” said Susag, a shareholder with the Larkin Hoffman law firm in Minneapolis.
Speaking in general terms, construction industry experts say it’s OK for contractors to maintain both union and non-union operations, but that they should proceed with caution.
Phil Raines, vice president of public affairs for the Associated Builders and Contractors of Minnesota and North Dakota, said that it’s not uncommon in the industry for a company to be double-breasted and that there are legitimate reasons for it.
“In order for a contractor to be able to work on a variety of jobs, sometimes they feel that is the best way to do it,” Raines said.
Dave Semerad, CEO of the Associated General Contractors of Minnesota, said unions argue that the double-breasted entity is “simply an alter-ego for the union entity,” and is therefore covered by the collective bargaining agreement.
He said there are “lots of ways for contractors to get into trouble” when going down that road, and that they should consult a good labor attorney for advice.
“You can’t go to your corporate counsel and expect that person to know the nuances of how to do that,” Semerad said. “It’s like going to a general practitioner to have a knee replacement.”
Curt Smith, an attorney with Moss & Barnett in Minneapolis, said the trick is to keep the two entities separate.
Sounds simple enough, but it’s easy to blur the lines.
“Any contractor or subcontractor looking to do that does need to get appropriate legal advice from someone who knows what they are talking about,” said Smith, who provides legal counsel for the Minnesota Subcontractors Association.
Meanwhile, local unions have been increasingly proactive in pursuing double-breasting cases.
Brendan Cummins, a Cummins and Cummins shareholder, said such cases have been on the rise since the economy went south in 2008.
“The construction economy was particularly bad, and contractors were looking for ways to pinch pennies any way they could,” Brendan Cummins said.
“Some of them tried to outright reject union contracts. … But others attempted to avoid their contracts by creating double-breasted operations, operating non-union when it was convenient to, to try to save costs and avoid paying union-scale wages and benefits.”
The Hicks case is one of the bigger recent settlements in Minnesota, but it’s not an isolated case.
In other recent double-breasting disputes in Minnesota, the Laborers Union 563 recently won a $656,622 settlement, and the Bricklayers and Allied Craft Workers won a $200,000 settlement.
Plaintiffs in the Hicks case included local unions representing laborers, cement masons, bricklayers and operators. Trustees of several fringe benefits funds also sued for damages.
In 2013, the unions sued Hicks Concrete, a union signatory company, and Construction Science in federal court, alleging that the companies operated as a single employer in violation of the union’s contracts.
The unions alleged in their complaint that Hicks Concrete Construction “supposedly closed its doors at the end of 2011,” but in fact continued to operate “as a single employer” with Construction Science LLC.
Business records showed that Hicks and Construction Science shared the same assets, including office, telephone number, storage facility, vehicles, equipment, trade name, corporate counsel, managers, supervisors, and field employees, the unions said.
The unions pursued back wages, back fees and dues, and back benefits contributions. On June 30, shortly before trial, Hicks and Construction Science agreed to the $1.3 million settlement.
Brendan Cummins said double-breasting has gone on for decades, both locally and nationally.
“This is not new in the playbook,” he said. “They want to have the best of both worlds, as they see it. They can’t do it. The contract applies to their company. It’s a contract evasion technique, and that is not lawful.”
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